10-Minute Treasurer

Mistake #5 – Living with Debt

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Roughly 80% of people in the US have consumer debt. They have unpaid credit card balances, student loans, medical debt, car loans, etc. Many of the people leading ministries assume debt is a fact of life and do not realize how dangerous and difficult it is for a ministry to be in debt. Here is how danger kills a ministry.

#1 – Paying More and getting Less

Maybe it’s just because I’m in the Midwest, but people in ministry love to brag about getting a good deal. It shows that you are stretching those ministry dollars. One of the reasons I got serious about paying off debt is I looked at the true cost. When I bought my first home, I thought I was buying it for $100,000. That was the mortgage amount and what the seller was going to receive. Then I did the math, and the bank was going to receive $93,000 over the next 30 years! I was going to pay $193,000 for a house worth $100,000. You need to do the math.

Here’s a good loan calculator: https://www.calculator.net/auto-loan-calculator.html

#2 – Losing Momentum…and Joy

Churches and nonprofits often take out debt because things are going well. The ministry is outgrowing the old building or there is a new opportunity that will help you serve more people. Here’s the problem: Even a growing nonprofit still is hoping to just break even for the year.

When you add debt, you are raising the bar. You may have been able to do well with a $250,000 budget, but now you need to raise an additional $25,000 to make the debt payments. Without the debt, raising an extra $25,000 would be a reason to celebrate. With the debt, feel like you are just surviving. Many ministries will cut expenses in the area of staff by not giving raises or reducing hours. Cutting staff can lead to cutting ministry which can leads to shrinking or stagnant income.

What if you wait until you have enough money to avoid the debt? Perhaps you’ll miss your window. Perhaps people will step up and continue to give because they see the need. Also, you get the bonus of having the bank pay you interest while you wait instead of paying interest to the bank.

#3 – Discourages Generous Giving

There is little joy in trying to raise enough money so you can fund your debt payments, and your donors can feel it. Most donors like investing in the future of a ministry…not their past decisions. Most donors like giving so that the needy are cared for…not giving to care for bankers. All of this adds up and discourages giving to ministry that is just managing debt payments.

When is Debt Okay?

There used to the rule of thumb that for a major project, 1/3 would be paid for by cash raised, 1/3 would be pledges, and 1/3 would be debt. I would suggest you drop the debt from the equation. 100% should be paid for through cash raised and pledges where debt is used to cover the gap until the pledges are paid in.

I recently saw an example of this from a ministry that put up a new building for $800,000. The campaign started in September of 2025. Pledges and cash came in to cover 100% of the cost by year end. By summer, they had a new building, no debt, and people still making pledge payments over the next two years.

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